Eastwood Insurance Services v. Titan Auto Insurance of Nm

FILED
NOT FOR PUBLICATION FEB 27 2012

MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U .S. C O U R T OF APPE ALS

FOR THE NINTH CIRCUIT

EASTWOOD INSURANCE SERVICES, No. 10-56314
INC., a California Corporation;
EASTWOOD INSURANCE AGENCY D.C. No. 8:08-cv-00788-CJC-AN
OF TEXAS, INC., a Texas Corporation;
EASTWOOD INSURANCE AGENCY
OF NEVADA, INC., a Nevada MEMORANDUM *
Corporation; EASTWOOD INSURANCE
AGENCY OF FLORIDA, INC., a Florida
Corporation; EASTWOOD AUTO
INSURANCE AGENCY OF ARIZONA,
INC., an Arizona Corporation,

Plaintiffs - Appellants,

v.

TITAN AUTO INSURANCE OF NEW
MEXICO, INC., a New Mexico
Corporation; THI HOLDINGS, INC., a
Delaware Corporation, Erroneously Sued
As Thi Holdings (Delaware) Inc;
NATIONWIDE MUTUAL INSURANCE
COMPANY, an Ohio Company,

Defendants - Appellees.

*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
EASTWOOD INSURANCE SERVICES, No. 10-56851
INC., a California Corporation;
EASTWOOD INSURANCE AGENCY D.C. No. 8:08-cv-00788-CJC-AN
OF TEXAS, INC., a Texas Corporation;
EASTWOOD INSURANCE AGENCY
OF NEVADA, INC., a Nevada
Corporation; EASTWOOD INSURANCE
AGENCY OF FLORIDA, INC., a Florida
Corporation; EASTWOOD AUTO
INSURANCE AGENCY OF ARIZONA,
INC., an Arizona Corporation,

Plaintiffs - Appellants,

v.

TITAN AUTO INSURANCE OF NEW
MEXICO, INC., a New Mexico
Corporation; THI HOLDINGS, INC., a
Delaware Corporation, Erroneously Sued
As Thi Holdings (Delaware) Inc;
NATIONWIDE MUTUAL INSURANCE
COMPANY, an Ohio Company,

Defendants - Appellees.

Appeal from the United States District Court
for the Central District of California
Cormac J. Carney, District Judge, Presiding

Argued and Submitted February 9, 2012
Pasadena, California

Before: D.W. NELSON, O’SCANNLAIN, and N.R. SMITH, Circuit Judges.

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 I

Eastwood Insurance Services, Inc. first appeals the district court’s order

granting summary judgment in favor of Titan Auto Insurance of New Mexico, Inc.

on Eastwood’s fraud claims. The district court granted summary judgment after

finding Eastwood’s evidence of Titan’s alleged misrepresentations inadmissible

under California’s parol evidence rule, which bars extrinsic evidence of a promise

“directly at variance with the promise of the writing.” Bank of Am. Nat’l Trust &

Sav. Ass’n v. Pendergrass, 48 P.2d 659, 661 (Cal. 1935). Titan’s alleged

statements were unconditional promises that directly varied the qualified language

of the agreement. See Cont’l Airlines, Inc. v. McDonnell Douglas Corp., 264 Cal.

Rptr. 779, 794–96 (Ct. App. 1989). The district court’s grant of summary

judgment in favor of Titan on Eastwood’s fraud claims was proper.

II

Eastwood next challenges the district court’s order granting summary

judgment in favor of Titan on Eastwood’s breach of contract and breach of the

implied covenant of good faith and fair dealing claims. The parties’ agreement

contained an earnout clause requiring Titan to use “commercially reasonable

efforts” to maximize the performance of Eastwood’s assets; Eastwood contends

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that Titan breached the contract and acted in bad faith by acting to increase

profitability at the expense of this contractual obligation.

Commercial reasonableness “primarily involve[s] questions of fact, based on

all the circumstances.” Gifford v. J & A Holdings, 63 Cal. Rptr. 2d 253, 259 (Ct.

App. 1997). The district court granted summary judgment in favor of Titan after

concluding that it would be “a commercial absurdity” to require Titan to maximize

the performance of Eastwood’s assets at the expense of its own profitability. But

while “economic feasability and profitability . . . may be one circumstance of

commercial reasonableness, other factors, particularly those in the . . . industry,

will be relevant to the determination.” Sempra Energy Res. v. Cal. Dep’t of Water

Res., No. D043397, 2005 WL 1459950, at *9 n.12 (Cal. Ct. App. June 21, 2005)

(emphasis added). Whether Titan’s efforts were commercially reasonable under

the circumstances is a factual determination requiring consideration not only of

Titan’s profitability but also of the standards and customs of the industry, context,

and intent, and it should not have been resolved on a motion for summary

judgment. The district court erred in concluding there were no genuine issues of

material fact for trial.

III

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 Last, we vacate the award of attorneys’ fees to Titan. Under the parties’

agreement, attorneys’ fees are awarded only to a prevailing party. Awarding

attorneys’ fees should thus be deferred until there has been a final determination on

the merits. Cf. Turner v. McMahon, 830 F.2d 1003, 1009 (9th Cir. 1987).

AFFIRMED in part, REVERSED in part, VACATED, and REMANDED

for proceedings consistent with this disposition.

Each party shall bear its own costs of appeal.

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